Deal Reached in Volkswagen Emissions Cheating Scandal

SAN FRANCISCO (CN) — Volkswagen has reached a tentative deal with the U.S. government and vehicle owners to address the environmental impacts of its diesel emissions cheating scandal and compensate affected owners.

Attorneys for Volkswagen, the government and car owners presented the preliminary deal to U.S. District Judge Charles Breyer in court Thursday morning.

Under the agreement, Volkswagen will buy back or modify diesel-powered vehicles from car owners and allow anyone that leases an affected vehicle to cancel their lease. The deal also establishes a fund to address adverse effects on air quality caused by the excess emissions.

Breyer imposed a gag order on further details of the agreement, which he said is necessary to protect the integrity of negotiations as the parties work to finalize the deal.

"I ask everyone to withhold judgment on the settlement until the details of the settlements are made public," Breyer said.

The judge set a deadline of June 21 for submitting a motion for preliminary approval of the settlement, at which time all details will be made public.

"The fact that there is confidentiality in the negotiation of agreements in no way is meant to suggest the public will not have an opportunity to review and comment on any proposed agreement," Breyer said. "That will take place, but while being negotiated it's essential they remain confidential."

Breyer had given Volkswagen and the U.S. Environmental Protection Agency until Thursday to come up with a compensation plan to avoid a drawn-out trial.

The judge thanked all attorneys involved for diligently working through long nights and weekends to meet the Thursday deadline.

"We're not aware of another MDL [multi-district litigation] that's moved this quickly," Volkswagen attorney Robert Giuffra said. "I think that reflects that Volkswagen is committed to winning back the trust of its customers, regulators and all Americans."

Outside of the courtroom, a Volkswagen owner held a sign saying she paid $30,000 for a Volkwagen TDI that is now worth zero dollars.

Joyce Ertel Hulbert of Berkeley said she bought her vehicle one year ago under false pretenses and that she won't be satisfied unless Volkswagen gives her a full refund for the purchase price.

Volkswagen acknowledged in September that it had sold approximately 600,000 cars in the United States outfitted with "defeat-device" software that had hoodwinked emissions inspectors for years.

Using a sophisticated algorithm, the software kicks into full emissions-control mode only when it detects the vehicle is undergoing inspections. But on the road the cars emit up to 40 times the legal limit of nitrogen oxide, which contributes to the production of smog and has been linked to increased asthma attacks and deadly respiratory illnesses.

Volkswagen has been investigated by the EPA, the U.S. Justice Department, the Federal Trade Commission and the state of California as well as foreign regulators.

Around 500 consumer lawsuits against Volkswagen and its brands were consolidated before Breyer last December. He is also presiding over the lawsuit filed in January by the Justice Department on behalf of the EPA seeking penalties and other relief for various environmental violations.

The automaker told its shareholders last year that it had set aside $7.3 billion to help with the potential costs of a recall or regulatory penalties. The company is facing as much as $20 billion in fines for violating the Clean Air Act.

Volkswagen shares were boosted by 6.6 percent on Wednesday after news of the settlement broke.

Breyer set a court date of July 26 to hear the motion for preliminary approval of the settlement deal.

"These filings will be public, and the public will have an opportunity to fully review and evaluate the proposed agreements before they are approved or acted upon by the court," Breyer said.

New York Attorney General Eric T. Schneiderman was less enthusiastic about the proposed deal.

"The agreement in principle reached by certain parties to the Volkswagen litigation in federal court does not in any way resolve the consumer and environmental penalty claims of the states, or the states' claims for injunctive relief," Schneiderman said in a statement. "The multistate coalition — led by New York and the states of Connecticut, Massachusetts, Oregon, Tennessee, and Washington — continues to vigorously investigate Volkswagen's misconduct, and will aggressively pursue the recovery of substantial penalties and other appropriate relief."

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